ONGC to buy Conoco stake in Kazakhstan

New Delhi, Nov. 26: ONGC Videsh will acquire the 8.4 per cent stake of US energy major ConocoPhillips in the giant Kashagan oilfield in Kazakhstan for about $5 billion.

The acquisition, to be completed in the first half of 2013, is the biggest by the state-owned firm since the $2.1 billion buyout of Imperial Energy in 2009.

This is India’s biggest outbound deal since Airtel bought the mobile phone operations of Kuwait-based Zain in 15 African countries for $9 billion in 2010.

Kashagan, the biggest oilfield discovery in the world since Alaska’s Prudhoe Bay 1968, holds an estimated 30 billion barrels of oil, of which 8-12 billion barrels are recoverable.

The offshore field is operated by an international consortium under the North Caspian Sea Production Sharing Agreement. Italy’s Eni, Royal Dutch Shell, France’s Total, ExxonMobil and KazMunayGas have a 16.81 per cent stake each, while Inpex of Japan has 7.55 per cent and ConocoPhillips 8.4 per cent.

OVL’s stake buy is subject to the approval of governments of Kazakhstan and India and will only sail through if the partners in the Caspian Sea field waive their pre-emption rights.

Industry sources said ExxonMobil and Shell were seeking bigger stakes and operating control in Kashagan. OVL’s deal will depend on the two firms waiving their right of first refusal.

The acquisition will strengthen the country’s energy security drive as ONGC Videsh will get on an average a million tonnes a year for a period of over 25 years with a peak of 1.6 million tonnes from the planned acquisition.

“When Phase 2 and 3 are implemented, OVL’s share will be significantly higher,” ONGC said in a statement.

Kashagan Field, located in the shallow waters of the Kazakh North Caspian Sea, is the world’s largest current development project.

First production from the field is expected in 2013, with plans to extract up to 450,000 barrels of crude a day at the first stage.

“The sale of this quality asset is an important component of our ongoing strategic asset disposition programme,” ConocoPhillips official Don Wallette said.

The acquisition could spur closer co-operation between ONGC and ConocoPhillips in the exploration of shale gas resources in the country.

“We have given them all data we have on shale gas acreage. Based on their analysis and experience, they will now bring their understanding,” ONGC chairman and managing director Sudhir Vasudeva said.